Thailand Flood Disrupts Global Supply Chain

Thailand is underwater. The current flood is the worst the nation has faced in 50 years and hundreds have died. It’s a tragic disaster affecting millions, but it is also one that is having profound affects on the global supply chain.

For example, according to the global supplier database provider Panjiva (which had this interesting profile written about it last year), the United States imports more than one third of all its incoming hard drives from Thailand. And the reliance on these sales goes both ways: “By dollar value, hard drives are Thailand’s biggest export category to the United States — about $1.5 billion to-date,” says Panjiva.

They don’t provide precise numbers on the effect the flood has had so far — it is likely just too soon to know. But the disruption will be significant. Panjiva notes that the overall second quarter exports to the United States from Japan, which was hit by the most economically devastating disaster in history in March, fell 7% compared to the same period in 2010. Thailand’s economy is only 4% that of Japan’s, and the scale of disaster is hard to compare to the epic quake and tsunami that devastated an island nation whose $5.5 trillion 2010 GDP was the world’s third highest, but the effects will certainly be felt in parts of the tech world.

The number gurus at Panjiva have also detailed a few more of the economic products likely to be most affected: coconuts, shrimp, rice, pineapples and furniture. See the graphic below for a breakdown of how much each of these major commodities will affected by the floods.


The CLM Women’s Forum: Tackling Social Media

Yesterday was the 2nd annual CLM Women’s Forum. Held at the Walter Reade Theatre in Lincoln Center, the event drew more than 200 women from the fields of law, risk management and insurance. One of the engaging panel discussions was on the topic of social media and social networking. Leading this discussion was Holly Maust, president of Interactive Swim, a social media strategy company. Holly shared with us her wisdom on the topic, including:

  • Companies should harness the power of LinkedIn and Twitter — something not all companies have done, and those that do use these platforms usually aren’t using them to the best of their ability.
  • LinkedIn is the most important social media platform out there, but companies and entrepreneurs must learn to market themselves on LinkedIn without being “spammy.”
  • LinkedIn “recommendations” are the new job references. Embrace them.
  • Leverage yourself as a leader with your brand using Twitter, following three steps:
  1. Listen — where are people talking about your product?
  2. Engage — social media is a two-way conversation.
  3. Learn — stay agile and flexible by staying on top of new social media.
  • Do it the right way and do it ethically.

On the (somewhat) other side of the spectrum, Lori Seidenberg, vice president of enterprise risk management at Centerline Capital Group, sounded off against the use of social media in the workplace, saying her employer has considered restricting access to social media sites. And however much it hurts to hear, she has a few good points, including:

  • Social media hurts workplace productivity.
  • Engaging in social media and the various quizzes, games, applications, etc., that come along with some sites, breeds spam, some of which passes through a company’s server potentially causing cyber risks.
  • If you have something on your screen that another employee finds offensive, they can file a lawsuit.

In closing, Seidenberg stated that social media litigation is the next big wave.

Scary, and, unfortunately, true.


The 5 Companies Hit Hardest by the Thailand Floods

Thailand’s worst flooding in five decades has affected companies in every industry, from automotive to technology to pharmaceuticals and beyond. As we saw with the earthquake in Japan, it’s a company’s supply chain that is affected most when natural disasters strike. Thailand is a midsize country of 67 million people and its outsized importance in global supply chains is now becoming clear. Here are 5 companies most affected by the historical floods:

  1. Toyota — It seems as though any natural disaster affects this automotive manufacturer. Toyota announced today that it will suspend production at its plants in North American on Saturday, citing an interruption in the supply chain of some Thai-made components. Toyota plants in Indiana, Kentucky and Ontario, Canada, will be shut down until the situation in Thailand improves. As of last Friday, the floods had resulted in an output loss of 37,500 vehicles in the Southeast Asian country since Toyota idled three plants there October 10th. That number could potentially climb to 250,000 by mid-November. If that happens, it is estimated that operating profit could be reduced by $1.6 billion.
  2. Ford — On a conference call yesterday, Ford Chief Financial Officer Lewis Booth stated that the carmaker may lose production of 30,000 vehicles. Though Ford’s assembly plant is not affected, their supply chain is. The company said the Thai floods have cut fourth-quarter production so far by 17,000 vehicles due to supplier issues. That number could climb to 30,000. Ford said it is “working closely with its affected suppliers to return to production as quickly as possible and to minimize any potential impact in other regions.”
  3. Lenovo — The Chinese computer maker said yesterday that it expects its supply of hard disk drives to tighten “through the first quarter of next year.” Thailand supplies approximately 40% of the global output of hard disk data storage devices, meaning Lenovo is not the only company within the industry experiencing interruption issues. Western Digital and Seagate Technology have both said they expect to face a shortage of parts soon. Because of this, Apple announced they expect a shortage in the coming months of disk drives for their products, specifically the company’s Mac lines, according to Apple CEO Tim Cook .
  4. Canon — The Tokyo-based company has recently revised its full-year financial outlook based on concerns about the impact of flooding in Thailand. The company said the Thai flooding will lower its sales and operating profit by Y50 billion ($660,000) and Y20 billion ($264,000), respectively, in the fourth quarter.
  5. Sharp — Having recently announced that the company is almost fully recovered from the business interruption it experienced after the Japan earthquake in March, Japan’s number one liquid-crystal display maker is now stating that the Thai floods may affect revenue.

    Although Sharp’s manufacturing facilities in Thailand weren’t damaged, the company’s inability to secure certain parts from suppliers hit by the flooding may result in tens of billions of yen in lost revenue, said Sharp Executive Vice President Toshio Adachi at a press conference.

As companies scramble to obtain parts from other regions of the world, we are reminded that supply chain risk management is an often-overlooked segment of the discipline…until disaster strikes.

How to Get a Job in Risk Management

So you wanna be a risk manager? Great. First step: you’re going to need to get a job in the field. As always, that’s the challenging part. Most companies want people with experience. But how do you get experience if you need experience before you can get experience? How do you get that first job? A few top-level risk managers shared their philosophies on the matter with Property Casualty 360.

Tim East, director of corporate risk management for Walt Disney, told the site what he looks for when hiring.

At a minimum [for employees], a bachelor’s degree in a field that’s related to risk management/business, finance, management—the possibilities are many because risk management is broad.

For an entry-level position, that’s sufficient; for a more senior position, I’d like to see experience in the industry, either with an insurer or broker, and some certification such as the ARM, CPCU or other credential.

For schools, we look at Florida State Univ., Georgia Southern and the Katie School, although there are others emerging. For recruiting, we look for individuals who have the education and are the right fit for our unique organization.”

Michael Liebowitz, the top risk manager at New York University and a former president of RIMS (the organization that publishes this blog), had some interesting insight of his own.

The hardest thing today in finding someone is getting an individual who is well rounded. Sometimes students are very focused; they jump at the first job that comes along. I understand that, but there is a difference in working at the carriers or the brokers, compared to working inside a corporation with a risk-management department.

I would rather have someone with a blank slate than someone with preconceived notions, or who has obtained a little bit of experience over the last 18 months or year.

The ‘but’ is that this generation moves around, and how much time do you want to invest in someone who is going to be gone in two years?”

All good advice for those trying to break into the discipline.

Or, if all else fails …